Warranties Oblg of Vendee Cases

7/30/2019 Warranties Oblg of Vendee Cases

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CARBONELL VS. COURT OF APPEALS, AND PONCIO

69 SCRA 99, JANUARY 1976

FACTS:

On January 27, 1955, respondent Jose Poncio executed a private memorandum of sale of his parcel ofland with improvements situated in San Juan, Rizal in favor of petitioner Rosario Carbonell who knew

that the said property was at that time subject to a mortgage in favor of the Republic Savings Bank

(RSB) for the sum of P1,500.00. Four days later, Poncio, in another private memorandum, bound himself

to sell the same property for an improved price to one Emma Infante for the sum of P2,357.52, with the

latter still assuming the existing mortgage debt in favor of the RSB in the amount of P1,177.48. Thus, in

February 2, Poncio executed a formal registrable deed of sale in her (Infante's) favor. So, when the first

buyer Carbonell saw the seller Poncio a few days afterwards, bringing the formal deed of sale for the

latter's signature and the balance of the agreed cash payment, she was told that he could no longer

proceed with formalizing the contract with her (Carbonell) because he had already formalized a sales

contract in favor of Infante.

To protect her legal rights as the first buyer, Carbonell registered on February 8, 1955 with the Registerof Deeds her adverse claim as first buyer entitled to the property. Meanwhile, Infante, the second buyer,

was able to register the sale in her favor only on February 12, 1955, so that the transfer certificate of

title issued in her name carried the duly annotated adverse claim of Carbonell as the first buyer. The trial

court declared the claim of the second buyer Infante to be superior to that of the first buyer Carbonell, a

decision which the Court of Appeals reversed. Upon motion for reconsideration, however, Court of

Appeals annulled and set aside its first decision and affirmed the trial courts decision.

ISSUE:

Who has the superior right over the subject property?

HELD

The Supreme Court reversed the appellate courts decision and declared the first buyer Carbonell to have

the superior right over the subject property, relying on Article 1544 of the Civil Code. Unlike the first and

third paragraphs of said Article 1544, which accord preference to the one who first takes possession in

good faith of personal or real property, the second paragraph directs that ownership of immovable

property should be recognized in favor of one "who in good faith first recorded" his right. Under the first

and third paragraphs, good faith must characterize the prior possession, while under the second

paragraph, good faith must characterize the act of anterior registration.

When Carbonell bought the lot from Poncio on January 27, 1955, she was the only buyer thereof and the

title of Poncio was still in his name solely encumbered by bank mortgage duly annotated thereon.

Carbonell was not aware - and she could not have been aware - of any sale to Infante as there was nosuch sale to Infante then. Hence, Carbonell's prior purchase of the land was made in good faith which

did not cease after Poncio told her on January 31, 1955 of his second sale of the same lot to Infante.

Carbonell wanted to meet Infante but the latter refused so to protect her legal rights, Carbonell

registered her adverse claim on February 8, 1955. Under the circumstances, this recording of Carbonells

adverse claim should be deemed to have been done in good faith and should emphasize Infante's bad

faith when the latter registered her deed of sale 4 days later.


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Heirs of Sofia Quirong, etc. vs. Development Bank of the Philippines,G.R. No.

173441, December 3, 2009

Rescission (vs. resolution) of contract

If the heirs of a lot buyer were evicted from the lot because of a final judgment based on a right prior to the

sale (i.e., the seller did not validly acquire the lot from the person who sold the lot to the seller), should theevicted heirs file an action for rescission under article 1381 or an action for rescission/resolution under Article

1191? Within what period should the appropriate action be filed? Should the prescriptive period be four years

as provided under Article 1389 of the Civil Code, which states that the action to claim rescission must becommenced within four years? Or should the prescriptive period be 10 years as provided under Article 1144

of the Civil Code, which states that actions upon a written contract must be brought within 10 years from

the date the right of action accrues?

InHeirs of Sofia Quirong, etc. vs. Development Bank of the Philippines,G.R. No. 173441, December 3, 2009,

the late Emillo Daloppe left a parcel of land to his wife Felisa and nine children. To enable one of the children

(Rosa Dalope-Funcion) to get a loan from the Development Bank of the Philippines (DBP), Felisa sold the

parcel of land to Funcions. The Funcions failed to pay the loan. DBP subsequently foreclosed the mortgage

and made a conditional sale of the land to Sofia Quirong for PhP78,000. In their contract of sale, SofiaQuirong waived any warranty against eviction. The contract provided that the DBP did not guarantee

possession of the property and that it would not be liable for any lien or encumbrance on the same. Quirong

gave a down payment of P14,000.00.Two months after the conditional sale to Quirong, Felisa and her eight other children subsequently filed an

action for partition and declaration of nullity of documents with damages against DBP and the Funcions before

the Regional Trial Court (RTC) of Dagupan City. Notwithstanding the suit, the DBP executed a deed of

absolute sale of the subject lot in Sofia Quirongs favor. The deed of sale carried substantially the same waiver

of warranty against eviction and of any adverse lien or encumbrance.

Sofia Quirong having since died, her heirs filed an answer in intervention in which they asked the RTC to

award the lot to them and, should it instead be given to the Dalopes, to allow the Quirong heirs to recover the

lots value from the DBP. Because the heirs failed to file a formal offer of evidence, the trial court did not rule

on the merits of their claim to the lot and, alternatively, to relief from DBP.

The RTC rendered a decision, declaring DBPs sale to Sofia Quirong valid only with respect to the shares of

Felisa and Rosa Funcion in the property. It declared Felisas sale to the Funcions, the latters mortgage to the

DBP, and the latters sale to Sofia Quirong void insofar as they prejudiced the shares of the eight other

children of Emilio and Felisa who were each entitled to a tenth share in the subject lot.

The Quirong heirs then filed an action against DBP before the RTC of Dagupan City for rescission of the

contract of sale between Sofia Quirong, their predecessor, and the DBP and praying for the reimbursement ofthe price of P78,000.00 that she paid the bank plus damages. The heirs alleged that they were entitled to the

rescission of the sale because the decision in Civil Case D-7159 stripped them of nearly the whole of the lot

that Sofia Quirong, their predecessor, bought from DBP. DBP filed a motion to dismiss the action on ground

of prescription and res judicata but the RTC denied their motion.

After hearing the case, the RTC rendered a decision, rescinding the sale between Sofia Quirong and DBP and

ordering the latter to return to the Quirong heirs the PhP78,000.00 Sofia Quirong paid the bank. On appeal by

DBP, Court of Appeals (CA) reversed the RTC decision and dismissed the heirs action on the ground of

prescription. The CA concluded that, reckoned from the finality of the December 16, 1992 decision in Civil

Case D-7159, the complaint filed on June 10, 1998 was already barred by the 4-year prescriptive period under

Article 1389 of the Civil Code. The Quirong heirs filed a motion for reconsideration of the decision but the CA

court denied it.
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According to DBP, the prescriptive period should be 4 years as provided under Article 1389 of the Civil Code,

which provides that the action to claim rescission must be commenced within four years. On the other hand,

the Quirong heirs argue that it should be 10 years as provided under Article 1144 which states that actions

upon a written contract must be brought within 10 years from the date the right of action accrues.

The Supreme Court agreed with DBP that the prescriptive period was 4 years because the action involved was

one for rescission under Article 1381. The Court distinguished between a rescission under Article 1381 and arescission under Article 1191:

The remedy of rescission is not confined to the rescissible contracts enumerated under Article 1381.

Article 1191 of the Civil Code gives the injured party in reciprocal obligations, such as what contracts are

about, the option to choose between fulfillment and rescission. Arturo M. Tolentino, a well-known

authority in civil law, is quick to note, however, that the equivalent of Article 1191 in the old code actually

uses the term resolution rather than the present rescission. The calibrated meanings of these terms are

distinct.

Rescission is a subsidiary action based on injury to the plaintiffs economic interests as described in

Articles 1380 and 1381. Resolution, the action referred to in Article 1191, on the other hand, is based on

the defendants breach of faith, a violation of the reciprocity between the parties. As an action based on thebinding force of a written contract, therefore, rescission (resolution) under Article 1191 prescribes in 10

years. Ten years is the period of prescription of actions based on a written contract under Article 1144.

The distinction makes sense. Article 1191 gives the injured party an option to choose between, first,

fulfillment of the contract and, second, its rescission. An action to enforce a written contract (fulfillment) is

definitely an action upon a written contract, which prescribes in 10 years (Article 1144). It will not be

logical to make the remedy of fulfillment prescribe in 10 years while the alternative remedy of rescission

(or resolution) is made to prescribe after only four years as provided in Article 1389 when the injury from

which the two kinds of actions derive is the same.

The Court noted that the action filed by the Quirong heirs was an action for rescission (not resolution):

Here, the Quirong heirs alleged in their complaint that they were entitled to the rescission of the contract of

sale of the lot between the DBP and Sofia Quirong because the decision in Civil Case D-7159 deprived herheirs of nearly the whole of that lot. But what was the status of that contract at the time of the filing of the

action for rescission? Apparently, that contract of sale had already been fully performed when Sofia

Quirong paid the full price for the lot and when, in exchange, the DBP executed the deed of absolute sale

in her favor. There was a turnover of control of the property from DBP to Sofia Quirong since she assumed

under their contract, the ejectment of squatters and/or occupants on the lot, at her own expense.

Actually, the cause of action of the Quirong heirs stems from their having been ousted by final judgment

from the ownership of the lot that the DBP sold to Sofia Quirong, their predecessor, in violation of the

warranty against eviction that comes with every sale of property or thing. Article 1548 of the Civil Code

provides:

Article 1548. Eviction shall take place whenever by a final judgment based on a right prior to the sale or an

act imputable to the vendor, the vendee is deprived of the whole or of a part of thing purchased.

x x x x


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With the loss of 80% of the subject lot to the Dalopes by reason of the judgment of the RTC in Civil Case

D-7159, the Quirong heirs had the right to file an action for rescission against the DBP pursuant to the

provision of Article 1556 of the Civil Code which provides:

Article 1556. Should the vendee lose, by reason of the eviction, a part of the thing sold of such importance,

in relation to the whole, that he would not have bought it without said part, he may demand the rescission

of the contract; but with the obligation to return the thing without other encumbrances than those which ithad when he acquired it. x x x

Finally, the Court concluded that the action for rescission was barred by prescription as it was filed beyond the

4-year prescriptive period:

And that action for rescission, which is based on a subsequent economic loss suffered by the buyer, was

precisely the action that the Quirong heirs took against the DBP. Consequently, it prescribed as Article

1389 provides in four years from the time the action accrued. Since it accrued on January 28, 1993 whenthe decision in Civil Case D-7159 became final and executory and ousted the heirs from a substantial

portion of the lot, the latter had only until January 28, 1997 within which to file their action for rescission.

Given that they filed their action on June 10, 1998, they did so beyond the four-year period.

JAIME D. ANG v. COURT OF APPEALS AND BRUNO SOLEDAD

567 SCRA 53 (2008), SECOND DIVISION (Morales, J.)

Even under the principle of solut io indebi t i , Ang c annot recover from Soledad the amount he

paid BA Finance since Ang set t led the mortgage debt on his ow n vo l i t ion and that Soledad

did n ot benef i t therein, the lat ter not being the one who mortgaged the vehicle.

FACTS: Under a "car-swapping" scheme, Bruno Soledad sold his Mitsubishi GSR sedan 1982

model to Jaime Ang. For his part, Ang conveyed to Soledad his Mitsubishi Lancer model 1988. Ang,

a buyer and seller of used vehicles, later offered the Mitsubishi GSR for sale through Far Eastern

Motors, a second-hand auto display center. The vehicle was eventually sold to Paul Bugash. Before

the deed could be registered in Bugashs name, however, the vehicle was seized by virtue of a writ

of replevin on account of the alleged failure of Ronaldo Panes, the owner of the vehicle prior to

Soledad, to pay the mortgage debt constituted thereon.

To secure the release of the vehicle, Ang paid BA Finance. Soledad refused to reimburse,

despite repeated demands, drawing Ang to charge him for Estafa with abuse of confidence. By

Resolution, the City Prosecutors Office dismissed the complaint for insufficiency of evidence,

drawing Ang to file for consecutive complaints for damages against Soledad before the Regional

Trial Court (RTC) of Cebu City. Subsequently, the RTC rendered judgment in favor of Ang "for thesake of justice and equity, and in consonance with the salutary principle of non-enrichment at

anothers expense. The RTC then ordered Soledad to pay Ang the amount the latter paid to BA

Finance.

Soledad then appealed to the Appellate Court, which reverses the decision of the RTC. The Court of

Appeals dismissed Angs petition on the ground that the filing of said complaint seeking the awarding

of damages for breach of warranty has already prescribed.


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Hence, this petition to the High Court.

ISSUE:

1) Whether or not Angs cause of action had not yet prescribed when he filed the complaint

2) Whether or not Ang can recover from Soledad the amount he paid BA Finance on account of themortgage debt

HELD:

First Issue

The resolution of the sole issue of whether the complaint had prescribed hinges on a determination

of what kind of warranty is provided in the Deed of Absolute Sale subject of the present case.

A warranty is a statement or representation made by the seller of goods, contemporaneously and as

part of the contract of sale, having reference to the character, quality or title of the goods, and

by which he promises or undertakes to insure that certain facts are or shall be as he then represents

them. Warranties by the seller may be express or implied. Art. 1546 of the Civil Code defines

express warranty - Any affirmation of fact or any promise by the seller relating to the thing is an

express warranty if the natural tendency of such affirmation or promise is to induce the buyer to

purchase the same, and if the buyer purchases the thing relying thereon. On the other hand, an

implied warranty is that which the law derives by application or inference from the nature of the

transaction or the relative situation or circumstances of the parties, irrespective of any intention of

the seller to create it.

The ruling in Engineering & Machinery Corporation vs. Court of Appeals states that "the prescriptive

period for instituting actions based on a breach of express warranty is that specified in the contract,

and in the absence of such period, the general rule on rescission of contract, which is four years

(Article 1389, Civil Code)."

As for actions based on breach of implied warranty, the prescriptive period is, under Art. 1571

(warranty against hidden defects of or encumbrances upon the thing sold) and Art. 1548 (warranty

against eviction), six months from the date of delivery of the thing sold.

In declaring that he owned and had clean title to the vehicle at the time the Deed of Absolute Sale

was forged, Soledad gave an implied warranty of title. In pledging that he "will defend the same from

all claims or any claim whatsoever and will save the vendee from any suit by the government of theRepublic of the Philippines," Soledad gave a warranty against eviction.

Given Angs business of buying and selling used vehicles, he could not have merely relied on

Soledads affirmation that the car was free from liens and encumbrances. He was expected to have

thoroughly verified the cars registration and related documents.


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Since what Soledad, as seller, gave was an implied warranty, the prescriptive period to file a breach

thereof is six months after the delivery of the vehicle, following Art. 1571. But even if the date of filing

of the action is reckoned from the date petitioner instituted his first complaint for damages

on November 9, 1993, and not on July 15, 1996 when he filed the complaint subject of the present

petition, the action just the same had prescribed, it having been filed 16 months after July 28, 1992,

the date of delivery of the vehicle.

Second Issue

On the merits of his complaint for damages, even if Ang invokes breach of warranty against eviction

as inferred from the second part of the earlier-quoted provision of the Deed of Absolute Sale, the

following essential requisites for such breach: (1) The purchaser has been deprived of the whole or

part of the thing sold; (2) This eviction is by a final judgment; (3) The basis thereof is by virtue of a

right prior to the sale made by the vendor; and (4) The vendor has been summoned and made co-

defendant in the suit for eviction at the instance of the vendee, have not been met. For one, there is

no judgment which deprived Ang of the vehicle. For another, there was no suit for eviction in which

Soledad as seller was impleaded as co-defendant at the instance of the vendee.

Finally, even under the principle of solutio indebiti which the RTC applied, Ang cannot recover from

Soledad the amount he paid BA Finance. For, as the appellate court observed, Ang settled the

mortgage debt on his own volition under the supposition that he would resell the car. It turned out

that he did pay BA Finance in order to avoid returning the payment made by the ultimate buyer

Bugash. It need not be stressed that Soledad did not benefit from Angs paying BA Finance, he not

being the one who mortgaged the vehicle, hence, did not benefit from the proceeds thereof.

COCA-COLA BOTTLERS PHILIPPINES, INC. vs. CA and MS. LYDIA GERONIMO

G.R. No. 110295 October 18, 1993Petition for review on certiorari (under Rule45) the decision of the CADAVIDE, JR., J.:

FACTS: Private respondent was the proprietress of Kindergarten Wonderland Canteen in Dagupan City.In August 1989, some parents of the students complained to her that the Coke and Sprite soft drinks sold

by her contained fiber-like matter and other foreign substances. She brought the said bottles forexamination to DOH and it was found out that the soft drinks are adulterated. As a result, her per daysales of soft drinks severely plummeted that she had to close her shop on 12 December 1989 for losses.She demanded damages from petitioner before the RTC which dismissed the same on motion bypetitioner based on the ground of Prescription. On appeal, the CA annulled the orders of the RTC.

ISSUE: WON the action for damages by the proprietress against the soft drinks manufacturer should betreated as one for breach of implied warranty under article 1561 of the CC which prescribes after sixmonths from delivery of the thing sold.

RULING: Petition Denied.The SC agrees with the CAs conclusion that the cause of action in the case at bar is found on quasi-delictunder Article 1146 of the CC which prescribes in four years and not on breach of warranty under article1562 of the same code. This is supported by the allegations in the complaint which makes reference to thereckless and negligent manufacture of "adulterated food items intended to be sold for publicconsumption."


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SPOUSES JAIME BENOS v. SPOUSES GREGORIO LAWILAO

G.R. No. 172259, December 5, 2006

FACTS: On February 11,1999, petitioner-spouses Benos and respondent Lawilao executed a Pactode Retro Sale where Benos sold their lot and the building erected thereon for P300,000, one-half of

which to be paid in cash to the Benos and the other half to be paid to the bank to pay off the loans of

the Benos which was secured by the same lot and building. Under the contract, Benos could redeem

the property within 18 months from the date of execution by returning the contract price, otherwise,

the sale would become irrevocable. After paying the P150,000, Lawilao took possession of the

property, restructured it twicw, eventually the loan become due and demandable. On August 14,

2000, a son of Benos and Lawilao paid the bankl but the bank refused. Lawilao filed for consignation

against the bank and deposited the amount of P159,000.00. RTC declared Lawilao of the ownership

of the subject property, which was affirmed by the Court of Appeals.

ISSUE: Whether or not the contract of Pacto de Retro Sale be rescinded by the petitioner

RULING: In the instant case, records show that Lawilao filed the petition for consignation against the

bank in Civil Case without notifying the Benos. Hence, Lawilao failed to prove their offer to pay the

balance, even before the filing of the consignation case. Lawilao never notified the Benos. Thus, as

far as the Benos are concerned, there was no full and complete payment of the contract price which

gives them the right to rescind.

Petition is granted. Court of Appeals decision is reversed and set aside, that the Pacto de Retro Sale

is rescinded and petitioner are ordered to return the amount of P150,000 to respondents.

Eastern Assurance and Surety Corporation v. CA [322 SCRA 73 (Jan. 18, 2000)]Rate of Legal Interest

Facts: Private Respondent Tan insured his building in Dumaguete against fire with petitioner Eastern Assurance

(EASCO). In 1981, the building was destroyed by fire. Tans claim for indemnity was refused and therefore he filed a

complaint for breach of contract with damages. The RTC order EASCO to pay Tan the sum of the insurance policy

plus legal rate of interest from June 26 until fully paid.

The CA affirmed the decision. No further appeal was taken and the same became final and executory on Aug, 25

1993. EASCO thereafter tendered the full amount of the policy plus interest of 6% per annum from June 1981 to July

1993. Tan refused the accept on the ground that the legal rate of interest is 12%. EASCO filed with the RTC to fix

the legal rate of interest. The RTC issued a resolution fixing it at 12%. The CA set the interest at 6% from June 26,

1981 to Aug. 24,1993 and 12% from Aug. 25, 1993 until money judgment is fully paid.

Issue: What is the legal rate of interest for money judgments?

Held: In Eastern Shipping Line v CA the Court held (at pp. 95-97)

II. With regard particularly to an award of interest in the concept of actual and compensatory damages, the rate of

interest, as well as the accrual thereof, is imposed, as follows:

1. When the obligation is breached, and it consists in the payment of a sum of money, i.e., a loan or forbearance of


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money, the interest due should be that which may have been stipulated in writing. Furthermore, the interest due shall

itself earn legal interest from the time it is judicially demanded. In the absence of stipulation, the rate of interest shall

be 12 per annum to be computed from default, i.e., from judicial or extrajudicial demand under and subject to the

provisions of Article 1169 of the Civil Code.

2. When an obligation, not constituting a loan or forbearance of money, is breached, an interest on the amount of

damages awarded may be imposed at the discretion of the court at the rate of 6 per annum. No interest, however,

shall be adjudged on unliquidated claims or damages except when or until the demand can be established with

reasonable certainty. Accordingly, where the demand is established with reasonable certainty, the interest shall begin

to run from the time the claim is made judicially or extrajudicially (Art. 1169, Civil Code) but when such certainty

cannot be so reasonably established at the time the demand is made, the interest shall begin to run only from the

date the judgment of the court is made (at which time the quantification of damages may be deemed to have been

reasonably ascertained). The actual base for the computation of legal interest shall, in any case, be on the amount

finally adjudged.

3. When the judgment of the court awarding a sum of money becomes final and executory, the rate of legal interest,

whether the case falls under paragraph 1 or paragraph 2, above, shall be 12 per annum from such finality until its

satisfaction, this interim period being deemed to be by then an equivalent to a forbearance of credit

This case falls under paragraph 3. When the judgment awarding a sum of money becomes final and executory, the

monetary award shall earn interest at 12% per annum from the date of such finality until its satisfaction, regardless of

whether the case involves a loan or forbearance of money. The reason is that this interim period is deemed to be by

then equivalent to a forbearance of credit

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Warranties Oblg of Vendee Cases